Apria Shares Fall After Search for Buyer Halted

Shares of Apria Healthcare Group Inc. fell 14% Thursday after the giant home health-care company ended an almost year-long search for a buyer and said it will remain independent.

Apria shares fell $1.25, to $7.75, in New York Stock Exchange trading. The Costa Mesa company disclosed the decision late Wednesday after the markets closed.

The board reviewed proposals from at least three parties that offered to take control of the money-losing company since a recapitalization agreement collapsed in March. Delays in the search for a buyer, begun last June, caused shareholders to criticize executives and hurt the company’s ability to recruit managers.

“This process has been a morale buster and a terrible distraction to the employees and management, and overall had an insidious effect on the company,” Apria Chairman Ralph Whitworth said late Wednesday. “It didn’t result in any compelling alternatives.”

Whitworth said the board determined that staying independent would be the best way for Apria to boost its flagging share price, which has fallen 55% in the past year. By comparison, Standard & Poor’s Midcap Health-Care Services Index has fallen 6.6% over the same period.

The decision to remain independent didn’t sit well with some shareholders.

Daniel Loeb, managing member of Third Point Management Co., which owns more than 1% of Apria, called on the board to say why it rejected the offers under consideration.

“We would like the board to disclose the nature of the offers that they rejected and explain why a go-it-alone strategy is superior,” Loeb said.

Whitworth didn’t rule out the possibility that the board might explore selling the company in the future. He said its priorities will be to improve Apria’s business and recruit new directors to run for election at its July 28 annual meeting.

Five of its 11 board members resigned Wednesday, including George Argyros, a former Apria chairman who said last month he might bid to buy the company. Apria will replace those directors with at least one endorsed by Michael Price’s Franklin Mutual Advisors, the second-largest shareholder with an 8.6% stake.

It will also “reach out to other shareholders for potential board nominees,” Whitworth said.

Whitworth is one of several board members who hold large stakes in Apria. Relational Investors LLC, for which he’s managing member, owns 9.9% of Apria, making it the company’s largest shareholder.

“We must focus on righting the company, rather than looking externally for solutions,” said Whitworth, who declined to comment on the share price decline.

Apria had a loss of $272 million last year as the federal government and health insurers cut the fees they’re willing to pay for home health-care services.

One proposal called for merging Apria with Denver-based Coram Healthcare Corp. and hiring Coram Chief Executive Donald Amaral as its CEO.

Amaral declined Wednesday to say whether he would continue pursuing a bid for Apria if his offer was rejected.

Argyros said through a spokesman that he was resigning to “maintain maximum flexibility” concerning his investment in Apria. As of April 27, Argyros owned a 5.4% stake.